| HOME | HELP | FEEDBACK | SUBSCRIPTIONS | ARCHIVE | SEARCH | TABLE OF CONTENTS |
|
|
|
|||||||
|
|||||||||
Columbia University, New York, New York
This paper addresses the simultaneous determination of pricing and inventory replenishment strategies in the face of demand uncertainty. More specifically, we analyze the following single item, periodic review model. Demands in consecutive periods are independent, but their distributions depend on the item's price in accordance with general stochastic demand functions. The price charged in any given period can be specified dynamically as a function of the state of the system. A replenishment order may be placed at the beginning of some or all of the periods. Stockouts are fully backlogged. We address both finite and infinite horizon models, with the objective of maximizing total expected discounted profit or its time average value, assuming that prices can either be adjusted arbitrarily (upward or downward) or that they can only be decreased. We characterize the structure of an optimal combined pricing and inventory strategy for all of the above types of models. We also develop an efficient value iteration method to compute these optimal strategies. Finally, we report on an extensive numerical study that characterizes various qualitative properties of the optimal strategies and corresponding optimal profit values.
Columbia University, New York, New York
Subject classifications: inventory/production; uncertainty; stochastic; operating characteristics; planning horizons; marketing; pricing.
This article has been cited by other articles:
|
|
 |
|
  W. S. Lim Overselling in a Competitive Environment: Boon or Bane? Marketing Science, November 1, 2009; 28(6): 1129 - 1143. [Abstract] [PDF]
|
|
|
|
 |
|
 H.-S. Ahn, M. Gumus, and P. Kaminsky Inventory, Discounts, and the Timing Effect MSOM, October 1, 2009; 11(4): 613 - 629. [Abstract] [PDF]
|
|
|
|
 |
|
 F. de Vericourt and M. S. Lobo Resource and Revenue Management in Nonprofit Operations Operations Research, September 1, 2009; 57(5): 1114 - 1128. [Abstract] [PDF]
|
|
|
|
|
|
Y. Li, A. Lim, and B. Rodrigues Note--Pricing and Inventory Control for a Perishable Product MSOM, July 1, 2009; 11(3): 538 - 542. [Abstract] [PDF]
|
|
|
|
 |
|
 Q. Liu and G. J. van Ryzin Strategic Capacity Rationing to Induce Early Purchases Management Science, June 1, 2008; 54(6): 1115 - 1131. [Abstract] [PDF]
|
|
|
|
|
|
W. T. Huh and G. Janakiraman (s, S) Optimality in Joint Inventory-Pricing Control: An Alternate Approach Operations Research, May 1, 2008; 56(3): 783 - 790. [Abstract] [PDF]
|
|
|
|
|
|
B. Tomlin and Y. Wang Pricing and Operational Recourse in Coproduction Systems Management Science, March 1, 2008; 54(3): 522 - 537. [Abstract] [PDF]
|
|
|
|
 |
|
 F. S. Oliveira A Constraint Logic Programming Algorithm for Modeling Dynamic Pricing INFORMS Journal on Computing, January 1, 2008; 20(1): 69 - 77. [Abstract] [PDF]
|
|
|
|
|
|
W. T. Huh and G. Janakiraman Inventory Management with Auctions and Other Sales Channels: Optimality of (s, S) Policies Management Science, January 1, 2008; 54(1): 139 - 150. [Abstract] [PDF]
|
|
|
|
|
|
W. Elmaghraby, A. Gulcu, and P. Keskinocak Designing Optimal Preannounced Markdowns in the Presence of Rational Customers with Multiunit Demands MSOM, January 1, 2008; 10(1): 126 - 148. [Abstract] [PDF]
|
|
|
|
|
|
H.-s. Ahn, M. Gumus, and P. Kaminsky Pricing and Manufacturing Decisions When Demand Is a Function of Prices in Multiple Periods Operations Research, November 1, 2007; 55(6): 1039 - 1057. [Abstract] [PDF]
|
|
|
|
|
|
X. Chen, M. Sim, D. Simchi-Levi, and P. Sun Risk Aversion in Inventory Management Operations Research, September 1, 2007; 55(5): 828 - 842. [Abstract] [PDF]
|
|
|
|
|
|
X. Su Intertemporal Pricing with Strategic Customer Behavior Management Science, May 1, 2007; 53(5): 726 - 741. [Abstract] [PDF]
|
|
|
|
|
|
F. Bernstein and A. Federgruen Coordination Mechanisms for Supply Chains Under Price and Service Competition MSOM, January 1, 2007; 9(3): 242 - 262. [Abstract] [PDF]
|
|
|
|
|
|
G. P. Cachon and A. G. Kok Implementation of the Newsvendor Model with Clearance Pricing: How to (and How Not to) Estimate a Salvage Value MSOM, January 1, 2007; 9(3): 276 - 290. [Abstract] [PDF]
|
|
|
|
|
|
Y. Wang Joint Pricing-Production Decisions in Supply Chains of Complementary Products with Uncertain Demand Operations Research, November 1, 2006; 54(6): 1110 - 1127. [Abstract] [PDF]
|
|
|
|
|
|
G. Raz and E. L. Porteus A Fractiles Perspective to the Joint Price/Quantity Newsvendor Model Management Science, November 1, 2006; 52(11): 1764 - 1777. [Abstract] [PDF]
|
|
|
|
|
|
R. Caldentey and L. M. Wein Revenue Management of a Make-to-Stock Queue Operations Research, September 1, 2006; 54(5): 859 - 875. [Abstract] [PDF]
|
|
|
|
|
|
S. Netessine, S. Savin, and W. Xiao Revenue Management Through Dynamic Cross Selling in E-Commerce Retailing Operations Research, September 1, 2006; 54(5): 893 - 913. [Abstract] [PDF]
|
|
|
|
|
|
C. Maglaras Revenue Management for a Multiclass Single-Server Queue via a Fluid Model Analysis Operations Research, September 1, 2006; 54(5): 914 - 932. [Abstract] [PDF]
|
|
|
|
|
|
Q. Li and S. Zheng Joint Inventory Replenishment and Pricing Control for Systems with Uncertain Yield and Demand Operations Research, July 1, 2006; 54(4): 696 - 705. [Abstract] [PDF]
|
|
|
|
|
|
S. Deng and C. A. Yano Joint Production and Pricing Decisions with Setup Costs and Capacity Constraints Management Science, May 1, 2006; 52(5): 741 - 756. [Abstract] [PDF]
|
|
|
|
|
|
D. Bienstock, O. Raskina, I. Saniee, and Q. Wang Combined Network Design and Multiperiod Pricing: Modeling, Solution Techniques, and Computation Operations Research, March 1, 2006; 54(2): 261 - 276. [Abstract] [PDF]
|
|
|
|
|
|
H. K. Bhargava, D. Sun, and S. H. Xu Stockout Compensation: Joint Inventory and Price Optimization in Electronic Retailing INFORMS Journal on Computing, January 1, 2006; 18(2): 255 - 266. [Abstract] [PDF]
|
|
|
|
|
|
L. M. Ann Chan, D. Simchi-Levi, and J. Swann Pricing, Production, and Inventory Policies for Manufacturing with Stochastic Demand and Discretionary Sales MSOM, January 1, 2006; 8(2): 149 - 168. [Abstract] [PDF]
|
|
|
|
|
|
Q. Ding, P. Kouvelis, and J. M. Milner Dynamic Pricing Through Discounts for Optimizing Multiple-Class Demand Fulfillment Operations Research, January 1, 2006; 54(1): 169 - 183. [Abstract] [PDF]
|
|
|
|
|
|
S. Ray, S. Li, and Y. Song Tailored Supply Chain Decision Making Under Price-Sensitive Stochastic Demand and Delivery Uncertainty Management Science, December 1, 2005; 51(12): 1873 - 1891. [Abstract] [PDF]
|
|
|
|
|
|
Y. Aviv and A. Pazgal A Partially Observed Markov Decision Process for Dynamic Pricing Management Science, September 1, 2005; 51(9): 1400 - 1416. [Abstract] [PDF]
|
|
|
|
|
|
F. Bernstein and A. Federgruen A General Equilibrium Model for Industries with Price and Service Competition Operations Research, November 1, 2004; 52(6): 868 - 886. [Abstract] [PDF]
|
|
|
|
|
|
X. Chen and D. Simchi-Levi Coordinating Inventory Control and Pricing Strategies with Random Demand and Fixed Ordering Cost: The Finite Horizon Case Operations Research, November 1, 2004; 52(6): 887 - 896. [Abstract] [PDF]
|
|
|
|
 |
|
 X. Chen and D. Simchi-Levi Coordinating Inventory Control and Pricing Strategies with Random Demand and Fixed Ordering Cost: The Infinite Horizon Case Mathematics of Operations Research, August 1, 2004; 29(3): 698 - 723. [Abstract] [PDF]
|
|
|
|
|
|
G. Ryzin and G. Vulcano Optimal Auctioning and Ordering in an Infinite Horizon Inventory-Pricing System Operations Research, May 1, 2004; 52(3): 346 - 367. [Abstract] [PDF]
|
|
|
|
|
|
W. Elmaghraby and P. Keskinocak Dynamic Pricing in the Presence of Inventory Considerations: Research Overview, Current Practices, and Future Directions Management Science, October 1, 2003; 49(10): 1287 - 1309. [Abstract] [PDF]
|
|
|
|
|
|
Q. Li and D. Atkins Coordinating Replenishment and Pricing in a Firm MSOM, January 1, 2002; 4(4): 241 - 257. [Abstract] [PDF]
|
|
|
|
|
|
A. Federgruen and A. Heching Multilocation Combined Pricing and Inventory Control MSOM, January 1, 2002; 4(4): 275 - 295. [Abstract] [PDF]
|
|
|
|
|
|
F. Chen, A. Federgruen, and Y.-S. Zheng Near-Optimal Pricing and Replenishment Strategies for a Retail/Distribution System Operations Research, November 1, 2001; 49(6): 839 - 853. [Abstract] [PDF]
|
|
|
|
|
|
J. A. Van Mieghem and M. Dada Price Versus Production Postponement: Capacity and Competition Management Science, December 1, 1999; 45(12): 1639 - 1649. [Abstract] [PDF]
|
|
| HOME | HELP | FEEDBACK | SUBSCRIPTIONS | ARCHIVE | SEARCH | TABLE OF CONTENTS |
